EX-99.A 2 d64679_ex99-a.htm PRESS RELEASE OF ARVINMERITOR, INC.
 
CONTACTS: Media Inquiries
Lin Cummins
(248) 435-7112
linda.cummins@arvinmeritor.com
 
Investor Inquiries
Brian Casey
(248) 435-0015
brian.casey@arvinmeritor.com
 
ArvinMeritor Reports Fiscal Year 2005 Third-Quarter Results
 

TROY, Mich. (July 28, 2005)  — ArvinMeritor, Inc. (NYSE: ARM) today reported financial results for its third fiscal quarter ended June 30, 2005.

 
• Sales of $2.4 billion, up 15 percent from the same period last year
 
• Commercial Vehicle Systems (CVS) sales of $1.1 billion, up $256 million, or 30 percent, from last year’s third quarter, with an operating margin of 6.4 percent, up from 5.7 percent in the third quarter of the prior year
 
• Income from continuing operations, excluding $4 million of after-tax restructuring costs for programs announced in May, was $48 million, or $0.70 cents per diluted share, up 14 percent from the same period last year 
 
• Free cash flow was $51 million, an improvement of $48 million compared to the third quarter of fiscal year 2004
 

        “We had a strong third quarter, despite difficult industry conditions,” said Chairman, CEO and President Charles G. “Chip” McClure. “Continued strong volumes in our CVS business, along with a well-balanced product, customer and geographic mix, drove increased sales. The restructuring actions we announced in May are beginning to produce results and strengthen our overall financial position. I am proud of our entire organization and what we have been able to accomplish during an exceptionally demanding time.”

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Third-Quarter Results 2005

          For the third quarter of fiscal year 2005, ArvinMeritor posted sales of $2.4 billion, a 15-percent increase when compared to the same period last year. The primary factors that contributed to this increase were higher volumes in CVS and sales from the company’s new commercial vehicle axle joint ventures with the Volvo Group in Europe. In addition, currency translation, primarily due to the stronger euro in relation to the U.S. dollar, increased sales approximately $60 million.

          Operating income was $90 million, up $8 million or 10 percent, compared to $82 million in the prior year’s third quarter. Operating income for the quarter includes $6 million of restructuring costs associated with programs announced in May. The increase in operating income was driven primarily by increased volumes in CVS and a continued focus on reducing cost and improving productivity.

          Income from continuing operations was $44 million, or $0.64 per diluted share, compared to $42 million, or $0.61 per diluted share a year ago. Excluding the $4 million of after-tax restructuring costs associated with programs announced in May, income from continuing operations was $48 million, or $0.70 per diluted share. These results are in line with the guidance the company provided in June.

          James Donlon, ArvinMeritor’s chief financial officer, said, “Although the cost of steel continued to have a negative impact on our financial performance this quarter, we’re beginning to see some moderation in the higher costs for steel.” Steel costs, net of recovery, were approximately $20 million higher in the third quarter than in the same period last year.

          Income from discontinued operations was $2 million, or $0.02 per diluted share, compared to $9 million, or $0.13 per diluted share last year. This decline is largely attributable to $6 million of after-tax costs associated with the company’s new supply agreement with Midas announced in May, and the loss of income resulting from the sale of Roll Coater in November 2004.

          Net income was $46 million, or $0.66 per diluted share, compared to net income of $51 million, or $0.74 per diluted share last year.

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Rationalize and Refocus

                As part of its ongoing efforts to rationalize and refocus its business, ArvinMeritor is on track with its previously announced workforce reductions and facility closures. In large part, these actions affect the global operations of the Light Vehicle Systems (LVS) business. Recently, the company announced the closing of a light vehicle exhaust operation in Mosciano, Italy. It also announced its intention to move the manufacturing of trailer axles from Wrexham, U. K., to a more cost efficient location. This move will potentially affect about 200 employees.

                The company also announced today that it is extending the timeframe for completion of the proposed sale of its Light Vehicle Aftermarket (LVA) business into fiscal year 2006. “We remain committed to becoming a more focused company, said McClure. “We are approaching the sale of LVA in a disciplined manner, and we are determined to achieve fair market value and a favorable return for ArvinMeritor and its shareowners.”

Fourth-Quarter and Fiscal Year 2005 Outlook

                ArvinMeritor’s forecast for North American Class 8 truck production is 310,000 units in fiscal year 2005, up from the previous outlook of 307,000 units. The company’s outlook for Western European heavy and medium truck volumes is 420,000 units, down slightly from the previous outlook of 421,000 units.

                For light vehicle production, the company’s fiscal year 2005 outlook is 15.6 million vehicles in North America, unchanged from our previous forecast, and 16.4 million vehicles in Western Europe, down from 16.9 million units.

                “Our sales outlook for fiscal year 2005 remains strong and is expected to be approximately $8.8 billion,” said McClure. The company expects its income from continuing operations for fiscal year 2005 to be at the higher end of the previously forecasted range of $1.40 to $1.60 per diluted share, before special items.

                “We are encouraged by the early results of our restructuring plan,” McClure continued. “Moving quickly is imperative in today’s automotive industry, and we intend

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to continue our efforts to evaluate all areas of the company. We will work diligently as a team to take the necessary actions to remove excess capacity, reduce fixed costs and increase our operational efficiencies.”

About ArvinMeritor

                ArvinMeritor, Inc. is a premier $8 billion global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. The company serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and related aftermarkets. Headquartered in Troy, Mich., ArvinMeritor employs approximately 31,000 people at more than 120 manufacturing facilities in 25 countries. ArvinMeritor common stock is traded on the New York Stock Exchange under the ticker symbol ARM. For more information, visit the company’s Web site at: http://www.arvinmeritor.com/.

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Forward-Looking Statements

                All earnings per share amounts are on a diluted basis. The company’s fiscal year ends on the Sunday nearest Sept. 30, and its fiscal quarters end on the Sundays nearest Dec. 31, March 31 and June 30. All year and quarter references relate to the company’s fiscal year and fiscal quarters, unless otherwise stated.

                This press release contains statements relating to future results of the company (including certain projections and business trends) that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including, but not limited to, global economic and market conditions; the demand for commercial, specialty and light vehicles for which the company supplies products; risks inherent in operating abroad (including foreign currency exchange rates and potential disruption of production and supply due to terrorist attacks or acts of aggression); availability and cost of raw materials, including steel; OEM program delays; demand for and market acceptance of new and existing products; successful development of new products; reliance on major OEM customers; labor relations of the company, its customers and suppliers; the financial condition of the company’s suppliers and customers, including potential bankruptcies; successful integration of acquired or merged businesses; the ability to achieve the expected annual savings and synergies from past and future business combinations; success and timing of potential divestitures; potential impairment of long-lived assets, including goodwill; competitive product and pricing pressures; the amount of the company’s debt; the ability of the company to access capital markets; credit ratings of the company’s debt; the outcome of existing and any future legal proceedings, including any litigation with respect to environmental or asbestos-related matters; as well as other risks and uncertainties, including, but not limited to, those detailed from time to time in the filings of the company with the Securities and Exchange Commission.


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Non-GAAP Measures

                In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (GAAP), the company has provided information regarding income from continuing operations, diluted earnings per share, and segment operating income and margins before special items which are non-GAAP financial measures. These non-GAAP measures are defined as reported income or loss from continuing operations, reported diluted earnings or loss per share and segment operating income plus or minus special items. The company has also provided information about “free cash flow”, a non-GAAP financial measure. Free cash flow represents net cash provided by operating activities before the net change in securitized and factored accounts receivables, less capital expenditures. The company believes it is appropriate to exclude the net change in securitized and factored accounts receivables in the calculation of free cash flow since the sale of receivables may be viewed as a substitute for borrowing activity.

                Management believes these non-GAAP financial measures are useful to both management and investors in the analysis of the company’s results of operations and financial position. Management believes free cash flow is useful in analyzing the company’s ability to service and repay its debt. These non-GAAP measures should not be considered a substitute for the reported results of operations or cash provided by operating activities prepared in accordance with GAAP. Furthermore, free cash flow does not reflect all available cash that could be used to service debt and does not reflect all funds available for investment or other discretionary uses. These non-GAAP financial measures may not be comparable to related or other similarly titled measures reported by other companies.

                Included is a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Third-Quarter Results Conference Call

                The company will host a telephone conference call and Web cast to discuss the company’s fiscal year 2005 third quarter financial results on Thursday, July 28, 2005, at 11:15 a.m. (ET). To participate, call (706) 643-7449 approximately 10 minutes prior to the start of the call. Please reference ArvinMeritor when dialing in to participate. Investors can also listen to the conference call in real time — or for 90 days by recording — by visiting www.arvinmeritor.com.



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                A replay of the call will be available from 1 p.m. July 28, until midnight, July 30, 2005, by calling (800) 642-1687 (within the United States and Canada) or (706) 645-9291 (international calls). Please refer to passcode 7411218.

                To access the listen-only audio Web cast, visit the ArvinMeritor Web site at http://www.arvinmeritor.com/ and click on the Web cast link on either the home page or investor page.



ARVINMERITOR, INC.
CONSOLIDATED INCOME STATEMENT
(Unaudited, in millions)
 
Quarter Ended
June 30,		 Nine Months Ended
June 30,
2005 2004 2005 2004
(Unaudited)
Sales   $ 2,411   $ 2,099   $ 6,777   $ 6,019  
Cost of Sales     (2,210 )   (1,913 )   (6,293 )   (5,513 )
   
 
 
 
 
GROSS MARGIN     201     186     484     506  
  SG&A     (104 )   (100 )   (288 )   (289 )
  Restructuring Costs     (7 )   (4 )   (81 )   (11 )
  Gain on Divestitures     —     —     4     20  
  Environmental Remediation Costs     —     —     (6 )   (8 )
  Customer Bankruptcies     —     —     (10 )   —  
  Costs for Withdrawn Tender Offer     —     —     —     (16 )
   
 
 
 
 
OPERATING INCOME     90     82     103     202  
  Equity in Earnings of Affiliates     7     5     20     12  
  Gain on Sale of Marketable Securities     —     —     —     7  
  Interest Expense, Net and Other     (31 )   (26 )   (89 )   (77 )
   
 
 
 
 
INCOME BEFORE TAXES     66     61     34     144  
  Provision for Income Taxes     (18 )   (16 )   (9 )   (39 )
  Minority Interests     (4 )   (3 )   (4 )   (8 )
   
 
 
 
 
Income From Continuing Operations     44     42     21     97  
Income from Discontinued Operations     2     9     10     14  
   
 
 
 
 
                           
NET INCOME   $ 46   $ 51   $ 31   $ 111  
   
 
 
 
 
                           
DILUTED EARNINGS PER SHARE                          
  Continuing Operations   $ 0.64   $ 0.61   $ 0.30   $ 1.41  
  Discontinued Operations     0.02     0.13     0.15     0.21  
   
 
 
 
 
Diluted Earnings Per Share   $ 0.66   $ 0.74   $ 0.45   $ 1.62  
   
 
 
 
 
                           
Diluted Shares Outstanding     69.2     68.8     69.3     68.6  
    
Note: Prior periods have been restated for the change in accounting for certain inventories and discontinued operations.


ARVINMERITOR, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION
(In millions)
 
Quarter Ended June 30, Nine Months Ended June 30,
2005 2004 2005 2004
(Unaudited) (Unaudited)
Sales:                          
  Light Vehicle Systems   $ 1,293   $ 1,237   $ 3,720   $ 3,703  
  Commercial Vehicle Systems     1,118     862     3,057     2,316  
   
 
 
 
 
Total Sales   $ 2,411   $ 2,099   $ 6,777   $ 6,019  
   
 
 
 
 
                           
Operating Income (Loss):                          
  Light Vehicle Systems   $ 20   $ 33   $ (35 ) $ 110  
  Commercial Vehicle Systems     72     49     146     116  
   
 
 
 
 
Segment Operating Income     92     82     111     226  
  Environmental Remediation Costs     —     —     (6 )   (8 )
  Unallocated Corporate Costs     (2 )   —     (2 )   —  
  Costs for Withdrawn Tender Offer     —     —     —     (16 )
   
 
 
 
 
Total Operating Income   $ 90   $ 82   $ 103   $ 202  
   
 
 
 
 
                   
Note: Prior periods have been restated for the change in accounting for certain inventories and discontinued operations.


ARVINMERITOR, INC.
SUMMARY CONSOLIDATED BALANCE SHEET
(In millions)
 
June 30,
2005		 September 30,
2004
(Unaudited)
ASSETS              
             
Cash   $ 180   $ 132  
Receivables     1,519     1,478  
Inventories     571     523  
Other current assets     256     238  
Assets of discontinued operations     575     615  
Net property     1,009     1,032  
Goodwill     800     808  
Other assets     816     813  
   
 
 
TOTAL ASSETS   $ 5,726   $ 5,639  
   
 
 
               
LIABILITIES AND SHAREOWNERS’ EQUITY              
             
Short-term debt   $ 40   $ 3  
Accounts payable     1,448     1,366  
Accrued and other current liabilities     664     622  
Liabilities of discontinued operations     241     282  
Other liabilities     771     830  
Long-term debt     1,472     1,487  
Minority interest     58     61  
Equity     1,032     988  
   
 
 
TOTAL LIABILITIES AND SHAREOWNERS’ EQUITY   $ 5,726   $ 5,639  
   
 
 


ARVINMERITOR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
 
Nine Months Ended
June 30,
 
 
  2005   2004  
 
 
 
OPERATING ACTIVITIES            
Income from continuing operations $ 21   $ 97  
  Adjustments to income from continuing operations
    Depreciation and other amortization		   137     138  
    Gain on divestitures   (4 )   (20 )
    Gain on sale of marketable securities   —     (7 )
    Restructuring costs, net of payments   55     1  
    Pension and retiree medical expense   82     99  
Pension and retiree medical contributions   (141 )   (185 )
Proceeds from termination of interest rate swaps   22     —  
Changes in receivable securitization and factoring   137     (115 )
Changes in assets and liabilities   (174 )   (71 )
 
 
 
Net cash flows provided by (used for) continuing operations   135     (63 )
Net cash flows provided by (used for) discontinued operations   (147 )   48  
 
 
 
CASH USED FOR OPERATING ACTIVITIES   (12 )   (15 )
 
 
 
         
INVESTING ACTIVITIES
  Capital expenditures   (102 )   (97 )
  Acquisitions of businesses and investments, net of cash acquired   (24 )   (1 )
  Proceeds from dispositions of property and businesses   38     84  
  Proceeds from sale of marketable securities   —     18  
  Net investing cash flows provided by (used for) discontinued operations   157     (10 )
 
 
 
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES   69     (6 )
 
 
 
FINANCING ACTIVITIES
    Net change in revolving debt   —     45  
    Payment of notes   (21 )   —  
    Net change in other debt   23   5  
 
 
 
  Net change in debt   2     50  
  Proceeds from exercise of stock options   5     5  
  Cash dividends   (21 )   (21 )
 
 
 
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES   (14 )   34  
 
 
 
             
IMPACT OF CURRENCY ON CASH   5     6  
             
CHANGE IN CASH   48     19  
CASH AT BEGINNING OF PERIOD   132     103  
 
 
 
CASH AT END OF PERIOD $ 180   $ 122  
 
 
 
         
Note: Prior periods have been restated for the change in accounting for certain inventories and discontinued operations.


ARVINMERITOR, INC.
SELECTED FINANCIAL INFORMATION - RECONCILATION
Non-GAAP
(Unaudited, in millions)
 
Q3 FY 05 Reported Restructuring
Actions 		Q3 FY05
Adjusted
 
 
 
 
Sales $ 2,411   $ —   $ 2,411  
Operating Income   90     6     96  
Income from Continuing Operations   44     4     48  
Diluted Earnings Per Share - Continuing Operations $ 0.64   $ 0.06   $ 0.70  
  
Operating Income
  LVS Operating Income $ 20   $ 5   $ 25  
  CVS Operating Income   72     1     73  
 
 
 
 
Segment Operating Income   92     6     98  
  Unallocated Corporate Costs   (2 )   —     (2 )
 
 
 
 
Total Operating Income $ 90   $ 6   $ 96  
 
 
 
 
Operating Margins                  
  LVS   1.5 %       1.9 %
  CVS   6.4 %       6.5 %
Segment Operating Margins   3.8 %       4.1 %
Total Operating Margins   3.7 %       4.0 %


ARVINMERITOR, INC.
FREE CASH FLOW RECONCILIATION
Non-GAAP
 (Unaudited, in millions)
 
Cash Flow
Provided by (Used for)
Operating Activities		   A/R Securitization
& Factoring		   Capital
Expenditures*		   Free Cash
Flow		  
Nine Months ended 06/30/05   $ (12 ) $ (137 ) $ (107 ) $ (256 )
Six Months ended 03/31/05     (203 )   (38 )   (66 )   (307 )
Three Months ended 06/30/05   $ 191   $ (99 ) $ (41 ) $ 51  
       
* Includes capital expenditures of discontinued operations of $5 million for the nine months ended 06/30/05 and $3 million for the six months ended 03/31/05.
   
Cash Flow
Provided by (Used for)
Operating Activities		   A/R Securitization
& Factoring		   Capital
Expenditures*		   Free Cash
Flow		  
Nine Months ended 06/30/04   $ (15 ) $ 115   $ (108 ) $ (8 )
Six Months ended 03/31/04     34     27     (72 )   (11 )
Three Months ended 06/30/04   $ (49 ) $ 88   $ (36 ) $ 3  
       
* Includes capital expenditures of discontinued operations of $11 million for the nine months ended 06/30/04 and $9 million for the six months ended 03/31/04.